How to stay calm during drawdowns

What a drawdown actually is

A drawdown is simply the percentage fall from a portfolio's peak value to its current value. A 10% drawdown means your portfolio is worth 10% less than it was at its highest point. A 30% drawdown — which happens during serious bear markets — means a £100,000 portfolio is now showing £70,000.

Drawdowns feel catastrophic in real time. They look manageable in retrospect. This gap between felt experience and historical reality is where most long-term investing damage occurs.

Corrections and bear markets: what's normal

Market falls of different sizes happen with predictable frequency:

• A correction (10%+ fall) happens roughly once per year on average in developed equity markets
• A bear market (20%+ fall) has historically occurred roughly every 3–5 years
• Severe bear markets (30–50% falls) are less frequent but have occurred multiple times since 1970 — and markets have recovered from all of them

Fidelity cites roughly 33% as the historical median US bear market decline. That is a significant number. It is also a number markets have recovered from, repeatedly, throughout history.

The cost of leaving

The most common damaging response to a drawdown is selling — converting a paper loss into a real one and waiting on the sidelines for markets to "calm down." The problem with this strategy is timing the return.

BlackRock has published research showing that in a single month — March 2020, during the initial COVID crash — three of the worst trading days since 1950 and five of the best happened within the same few weeks. An investor who left during the falls and waited for confidence to return missed the majority of the recovery.

Missing just the 10 best trading days over a 20-year period can reduce final portfolio value by 40% or more compared with staying invested throughout. The best days cluster near the worst days. You cannot have one without risking missing the other.

Why it feels so bad — and why that feeling is misleading

Behavioural research consistently finds that investment losses feel roughly twice as painful as equivalent gains feel good. This is not irrationality — it is how human psychology is wired. But it creates a systematic bias toward action at exactly the wrong moments.

When markets fall, everything in your environment amplifies the fear: news coverage intensifies, social media surfaces worst-case scenarios, colleagues and friends discuss their losses. The signal your brain receives is "danger — do something." For a long-term investor, the right response is almost always the opposite.

Practical steps when a drawdown feels overwhelming

• Do not check your portfolio daily. Frequent checking during falls intensifies distress without providing actionable information.
• Ask whether anything fundamental has changed. Has your time horizon shortened? Do you now need the money sooner? Has your actual financial situation changed? If the answer to all of these is no, the discomfort is perspective-related, not planning-related.
• Use the Perspective Check. The QuietGrowth Market Perspective Check is designed for exactly this moment — to help you classify whether what you are feeling is normal market discomfort or a genuine signal that your plan needs reviewing.
• Keep contributing. If you invest monthly, continuing during a drawdown means buying at lower prices. The investor who kept contributing monthly through 2020's COVID crash and 2022's interest rate sell-off built positions that recovered strongly. The investor who paused missed both the lower prices and the recovery gains.